topic Re: How does a personal loan secured with auto title affect credit in Auto Loans

How does a personal loan secured with auto title affect credit

christinapitt76 — Tue, 16 Jul 2013 23:20:09 GMT

I've been doing really good paying off old debt and getting them removed from my credit report.

I have one 2,000 debt remaining. I looked for options including spreading the debt across 3 of my credit cards.

I found a company that usally does high interest short-term payday type loans. They offered me a loan at an interest rate actually lower than my credit cards (21%) If I use my car as collateral.

I was told that on my credit report it will show up as a personal loan - secured. If another bank or company pulls my credit report it will say personal loan - secured - auto.

My original car loan is still on my credit report and it shows as paid in full.

My question is will this loan secured by a car look bad on my credit report? Is the fact that it is secured by a car look bad? Will it make any difference? The reason I ask is because I am working on improving my credit with the goal of eventually buying a house in 6 months to 1 year.

My current experian fico is 640, but this has the last old debt. I have already talked to the Lender, they have given me a letter that said they will remove this record from my credit report if I pay in full within 30 days. The new auto secured loan will be used to pay this old debt.

What do you think I should do? Do you know of any times when applying for a mortgage that the mortgage broker has said it is bad to have this type of secured auto loan, meaning a second loan secured with a car title, not the original car financing?

Re: How does a personal loan secured with auto title affect credit

Anonymous — Wed, 17 Jul 2013 18:29:39 GMT

There is a slight FICO ding for having a consumer finance loan in the credit report. And the loan monthly payment will be factored into your DTI when applying for a mortgage unless the loan is paid off or only has less than 6 payments remaining. For the loan amount you are talking about I can't imagine that it would be a long term obligation. Additionally the new account would have an affect on FICO scoring and Average Age of Accounts.

The advantage of having the last negative item removed from your credit report will provide a score boost far exceeding the minor dings of the above factors. Is it possible to secure the loan and NOT have them report to your credit?

Re: How does a personal loan secured with auto title affect credit

EmpressLuv — Thu, 18 Jul 2013 20:24:41 GMT

I had a loan like that when I applied for my mortgage and one of my conditions were to pay it off before I closed. When I asked why considering it had a few months left on it, I was told the underwriters look at it this way: that I can extend the loan at anytime or take out another one thus bringing up my DTI....didn't make sense but I said oh well and paid it off.